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What happens when PPP loan is flagged

The Paycheck Protection Program (PPP) Loan Fraud

The PPP loan program was established to provide low-interest loans to small businesses that had been adversely impacted by the coronavirus pandemic. Businesses that received a PPP loan were required to spend it on approved expenses like payroll, rent, and utilities.

The loan program was popular, but some businesses have been accused of misusing PPP funds. Some recipients may have falsified information on their loan applications to make themselves eligible.

In some cases, businesses that received PPP loans may have used the funds for purposes other than what they were intended for. For example, some businesses may have used PPP loan funds to buy inventory that they could sell at a profit.

The SBA has said that it will audit all PPP loans over $2 million, and it has flagged some loans for further review. Businesses that have had their loans flagged may be subject to increased scrutiny from the SBA.

Spodek Law Group, P.C. - NYC Criminal Attorneys
Spodek Law Group, P.C. - NYC Criminal Attorneys
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George FernandezGeorge Fernandez
14:16 30 Apr 24
Excellent 10 out of 10, Helped resolve my case. Jeremy explained everything and made everything easy to understand.
RajRaj
21:33 24 Apr 24
If you are looking for a lawyer that listens, is aggressive where needed, and holds his word above all else, Todd is the best pick. I had hired multiple attorneys prior to hiring the Spodek Group for a white collar case. The first thing that stood out to me was the cost, as anyone going through the process and dealing with the system, money was tight at that time - especially after hiring and firing multiple lawyers. The cost was not as high as others which was definitely a plus. Todd's intake process was also unlike other attorneys. He took the time to actually listen. He cared. He was trying to put himself in my shoes while I was explaining the situation to him and he really took the time to understand the whole situation. Other lawyers will give you 15 mins and send you a retainer agreement. Not Todd, I think he spent almost two hours with me as I was explaining everything.Not only was he great during the onboarding process, he was supportive and very informative through the entire plea process and eventually sentencing. After hiring him, I asked if I should hire a prison consultant, he told me to save my money as he would do everything they would. He was right and held up to his word. Later on I would hear from others that went with the prison consultants that they were a waste of money - I am glad I listened to Todd!When it came time for sentencing, two days prior to sentencing, the prosecutor tried increasing my proposed prison time by almost double - apparently a normal move. Todd and his team worked with me non-stop through the weekend prior to sentencing to ensure that I was not given additional prison time. Again, he took the time to listen and came up with a strategy to explain the case with great detail.Unfortunately, I did plead guilty as that was my best option. Todd and his whole team wrote up nearly 300 pages of a summary of what happened and why I should not be given prison time. If I breakdown the amount I spent with Todd versus the amount of work that I saw being done, I am shocked I was not charged four times as much. The other benefit was, a lot of criminal defense lawyers were just a single attorney with a paralegal or two. Todd had a team of people that I dealt with (5-7 people that I interacted with), but he was ALWAYS accessible. It would never take him more than an hour to reply unless he was in court.I was sentenced to prison and I was emotionally distraught. Todd and his team did whatever they could even after sentencing to make sure I was alright. He personally stayed in touch with my family to ensure I was doing alright and offered support to them. Most lawyers would consider the job complete at sentencing, not Todd.After prison, Todd still spent time with me to make sure I was on the right track and avoiding any potential risks in the future. He has also been giving advice on how to navigate probation etc and has not been looking at the clock for billing.Although I wish I had never been arrested in the first place, I am glad I had Todd and his team in my corner. Without them I likely would have had to spend a lot more time in prison than I did.Thank you, Todd, and the entire Spodek Law team, for helping turn what was a nightmare into a manageable situation!
Yelva Saint-PreuxYelva Saint-Preux
19:26 19 Apr 24
I am immensely grateful to the entire team at Spodek Law Group for their unwavering dedication and exceptional expertise throughout my case. From our initial consultation to the final resolution, their professionalism and tireless advocacy made all the difference. Their strategic approach and attention to detail instilled confidence in me every step of the way.Thanks to their hard work and commitment, we achieved a truly favorable outcome that exceeded my expectations. Not only did they navigate the complexities of my case with precision, but they also provided invaluable support and guidance during what was undoubtedly a challenging time. I cannot recommend Spodek Law Group highly enough, especially attorneys Todd Spodek and Claire Banks; they are beacons of excellence in the legal profession.YSP.
Katherine SunKatherine Sun
18:08 18 Apr 24
my lawyer is Alex Zhik. Efficient, patient and professional
Nun yaNun ya
17:48 18 Apr 24
Todd, Ralph and Alex are amazing. Helped my husband get from a double digit number with multiple charges to a single digit, by the time I blink he will be out. They very professional and help with all your needs. They dealt with my anxiety and worry very well and they understand that your family member needs to get home as soon as possible.
Keisha ParrisKeisha Parris
20:45 15 Mar 24
Believe every single review here about Alex Z!! From our initial consultation, it was evident that Alex possessed a profound understanding of criminal law and a fierce dedication to his clients rights. Throughout the entirety of my case, Alex exhibited unparalleled professionalism and unwavering commitment. What sets Alex apart is not only his legal expertise but also his genuine compassion for his clients. He took the time to thoroughly explain my case, alleviating any concerns I had along the way. His exact words were “I’m not worried about it”. His unwavering support and guidance were invaluable throughout the entire process. I am immensely grateful for Alex's exceptional legal representation and wholeheartedly recommend his services to anyone in need of a skilled criminal defense attorney. Alex Z is not just a lawyer; he is a beacon of hope for those navigating the complexities of the legal system. If you find yourself in need of a dedicated and competent legal advocate, look no further than Alex Z.
Taïko BeautyTaïko Beauty
16:26 15 Mar 24
I don’t know where to start, I can write a novel about this firm, but one thing I will say is that having my best interest was their main priority since the beginning of my case which was back in Winter 2019. Miss Claire Banks, one of the best Attorneys in the firm represented me very well and was very professional, respectful, and truthful. Not once did she leave me in the dark, in fact she presented all options and routes that could possibly be considered for my case and she reinsured me that no matter what I decided to do, her and the team will have my back and that’s exactly what happened. Not only will I be liberated from this case, also, I will enjoy my freedom and continue to be a mother to my first born son and will have no restrictions with accomplishing my goals in life. Now that’s what I call victory!! I thank the Lord, My mother, Claire, and the Spodek team for standing by me and fighting with me. Words can’t describe how grateful I am to have the opportunity to work with this team. I’m very satisfied, very pleased with their performance, their hard work, and their diligence.Thank you team!
K MarK Mar
01:37 25 Jan 24
I recently had Spodek Law Group represent me for a legal matter in NYC and I am thoroughly impressed with their services.Alex Zhik secured the best possible outcome for my case.It was a seamless journey from the initial consultation to the resolution of my legal matter. From the moment I spoke to Todd about my case, his enthusiasm to help was evident, setting a positive tone for the entire experience. The efficiency and professionalism displayed by the team is commendable.A particularly noteworthy aspect of their service is their user-friendly portal to upload your documents/evidence. This not only simplified the process, but showcases their commitment to streamline the client experience.Lastly, in an industry where legal fees can often be a concern, I found their pricing to be very reasonable, making needing legal assistance feel accessible and stress-free.I am grateful for their support and wouldn't hesitate to turn to them again in the future.
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Research on PPP Loan Fraud

In 2020 a research study was done, where it was estimated that between 10-15% of loans approved went to borrowers who may have been double dipping (taking too much money from relief programs). In some cases it was unintentional, but in other situations it was fraudulent. Congress included PPP as one of several relief packages in the COVID Act. This was to help businesses retain employees, and prevent people from falling into poverty.

Researchers in 2020 lay the blame on “FinTech” lenders, who didn’t spend enough time stringently analyzing all the loan requests. There was a lot of fraud, or misuse of funds under the PPP program.

PPP Loan Fraud Penalties

There are serious penalties associated with PPP loan fraud. An individual who makes a false statement or representation on a loan application to obtain a PPP loan could face:

  • A fine of up to $250,000
  • A maximum term of imprisonment of five years
  • Or both

If convicted of a crime related to the PPP loan program, an individual may also face civil liability from the United States in the form of a civil action for any damages or losses caused by the individual’s fraudulent conduct.

In addition to possible criminal and civil penalties, an individual who obtains a PPP loan as a result of fraud may be required to repay the full amount of the loan plus interest.

What Happens When a PPP Loan is Flagged?

Many people are receiving requests for information from the government. The question borrowers and banks are wondering about – is what to do, if a subpoena or request for information about the PPP loan is received.

First thing – after a PPP loan is flagged – you should contact our PPP loan fraud lawyers immediately. Responding to the subpoena or investigative request is a task which must be taken seriously. You should involve an advisor to guide you through this process.

You should not do anything before you talk to counsel – because doing so might introduce new evidence that can be used against you. You should develop a strategy to respond to the government with counsel.

All loans over $2 million are by default – being audited. If you took a loan under $2 million, and it is flagged – this can be concerning. It could be that one of your employees is a whistleblower, and as a result is bringing an action against you – by helping the government identify theft and fraud. These cases are known as qui tam cases. There are strict employment and federal laws on how you can deal with such scenarios. You cannot obstruct the government, or retaliate against the employee.

Why are PPP loans getting flagged?

There are multiple reasons why a PPP loan could be flagged by the SBA. Here are some circumstances behind why a red flag could be applied on a loan application:

  • The company applied for multiple PPP loans from different lenders
  • The company made false statements on their PPP loan application
  • They submitted an incomplete PPP loan application
  • Used PPP loan funds for unapproved expenses
  • Submitted false certification to receive PPP loan forgiveness

Federal prosecutors and criminal investigators are looking for PPP loan fraud, and other violations of the CARES Act.

What happens when a PPP loan is flagged

If your PPP loan is flagged, you will get a subpoena, or some other civil investigative demand. Depending on which agency is investigating you – the pathway could take a number of different turns. Bottom line, you will need to hire a PPP loan fraud defense lawyer who can help you – and guide you.

The different federal agencies could potentially charge you with a number of crimes, such as: bank fraud, wire fraud, conspiracy to commit fraud, false statements to a financial institution, and more.

If your PPP loan is flagged – you should assume you are under investigation for PPP loan fraud. This is essentially the beginning of the PPP loan fraud investigation – and you should hire a PPP loan fraud attorney who can help you.

When you get the notification that the PPP loan is flagged:

  • You should keep a record of all business and personal records, and not destroy anything
  • You should communicate with our attorneys as soon as possible to get help and guidance

PPP Jail Time

A PPP loan recipient who received a loan based on false information may face up to five years in prison and a fine of up to $250,000. Prior to the Paycheck Protection Program Flexibility Act, the maximum term of imprisonment was 30 years.

PPP Loan Forgiveness Fraud

The Paycheck Protection Program loan forgiveness process requires the recipient to document the use of the loan proceeds and the number of employees working during the covered period. Recipients who submit false information to the SBA when applying for loan forgiveness may face up to five years in prison and a fine of up to $250,000. Prior to the Paycheck Protection Program Flexibility Act, the maximum term of imprisonment was 30 years.

PPP Loan Fraud

PPP loan fraud is a crime that can be charged as a federal crime or as a state crime. Federal PPP loan fraud charges are brought under the federal False Claims Act or federal wire fraud or mail fraud laws. State PPP loan fraud charges are brought under state laws.

The federal False Claims Act prohibits the submission of false claims to the federal government. The False Claims Act applies to all claims for payment that are submitted to the federal government, including PPP loan applications.

The federal wire fraud and mail fraud laws prohibit the use of the U.S. mail or interstate wire communications in furtherance of any scheme to defraud. In order to convict a defendant of wire fraud or mail fraud, the government must prove that the defendant engaged in a scheme to defraud and that the defendant used the mail or interstate wire communications to further the scheme.

The federal wire fraud and mail fraud laws apply to all claims for payment that are submitted to the federal government, including PPP loan applications. The wire fraud and mail fraud laws also apply to claims for payment that are submitted to state and local governments, including PPP loan applications.

The federal wire fraud and mail fraud laws are broad laws that can be used to prosecute a wide variety of crimes. The wire fraud and mail fraud laws have been used to prosecute a wide variety of crimes, including PPP loan fraud.

State PPP loan fraud laws vary from state to state. Some states have laws that specifically prohibit PPP loan fraud. Other states have laws that prohibit the submission of false claims to the state government.

State PPP loan fraud laws are broad laws that can be used to prosecute a wide variety of crimes. State PPP loan fraud laws have been used to prosecute a wide variety of crimes, including PPP loan fraud.

PPP Loan Fraud Penalties

Federal PPP loan fraud penalties are set by federal law. The penalties for federal PPP loan fraud depend on the specific crime that is charged.

The False Claims Act imposes civil penalties of up to $11,000 for each false claim that is submitted to the government. The False Claims Act also imposes treble damages, which triple the amount of damages that the government suffers as a result of the false claims.

The wire fraud and mail fraud laws impose criminal penalties of up to 20 years in prison and a fine of up to $250,000.

State PPP loan fraud penalties vary from state to state. Some states have laws that specifically prohibit PPP loan fraud. Other states have laws that prohibit the submission of false claims to the state government.

The penalties for state PPP loan fraud depend on the specific crime that is charged. Some states impose criminal penalties for PPP loan fraud. Other states impose civil penalties for PPP loan fraud.

PPP Loan Fraud Statutes

Federal PPP loan fraud statutes are set by federal law. The federal statutes that apply to PPP loan fraud are:

  • The False Claims Act, codified at 31 U.S.C. 3729-3733. The False Claims Act prohibits the submission of false claims to the federal government.
  • The wire fraud statute, codified at 18 U.S.C. 1343. The wire fraud statute prohibits the use of the U.S. mail or interstate wire communications in furtherance of any scheme to defraud.
  • The mail fraud statute, codified at 18 U.S.C. 1341. The mail fraud statute prohibits the use of the U.S. mail in furtherance of any scheme to defraud.

State PPP loan fraud statutes vary from state to state. Some states have laws that specifically prohibit PPP loan fraud. Other states have laws that prohibit the submission of false claims to the state government.

PPP Loan Fraud Resources

The following resources provide information about PPP loan fraud:

We Can Help With PPP Flagged Loans In All 50 States

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